Britain is moving again, let’s keep going. Britain’s economic plan is working but the job is not done. We need to secure the economy for the long term

George Osborne

Mr Osborne was cheered by Tory MPs as he read out figures from the Office for Budget Responsibility forecasting 1.4 per cent growth for Britain this year, compared with the 0.6 per cent predicted in March.

Growth will accelerate to 2.4 per cent next year and then ease to 2.2 per cent in 2015, ­general election year.

“Britain is currently growing faster than any other advanced economy,” Mr Osborne said, noting the UK recovery was now outpacing that in Germany, France and the United States.

An extra 400,000 jobs will be created in Britain this year, the Office for Budget Responsibility said. At the same time, 2013 government borrowing is set to fall by £9billion and the deficit wiped out by the financial year 2018-19, says the watchdog.

Over the next five years the Treasury will borrow £73billion less than previously planned. But the Chancellor conceded that debt is still far too high.

“An improving economy does not let us off the hook from taking difficult decisions,” he said.

He promised to use the savings from lower borrowing to cut the deficit further rather than going on a spending spree. He said: “We will not squander the hard-earned gains of the British people.”

Schools, the NHS and overseas aid budgets will be exempt from the cuts [GETTY]

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Overall, his Autumn Statement delivered a modest £1.5billion a year in tax cuts and similar fall in public spending.

“We need a government that lives within its means, in a country that pays its way in the world,” Mr Osborne said.

He also set some political traps for Labour with plans for regular Parliamentary votes on the welfare cap and the role of the Office for Budget Responsibility in maintaining a tight grip on spending. He insisted Labour critics of his austerity plan had been “proved comprehensively wrong” by the positive economic news.

He said Coalition ministers had “held our nerve” and added: “Thanks to the sacrifice and endeavour of the British people, I can today report the hard evidence that shows our economic plan is working.”

He set out a further £3billion in spending cuts over the next two-and-a-half years, although schools, the NHS and overseas aid budgets will be exempt.

Despite the upbeat forecasts, some economists were cautious last night.

Paul Johnson, director of the Institute for Fiscal Studies, said: “We are still borrowing a lot more than £100billion this year which is a lot more than the Chancellor hoped back in 2010. There is an awful lot of austerity still to come.”

But CBI director general John Cridland said: “We have always advocated the dual approach of tackling the deficit and driving growth; the forecasts confirm it is working.”